Month: June 2019

Listen to my podcast of a ministry event, where I was one of the speakers, for encouragement to press through difficult situations that you did not want and that you have yet to get rid of:

Take a listen to my new elevator speech as an author, artist, and motivational speaker and let me know what you think!

Then take a listen to my new elevator speech for my 501c3 Non-Profit organization, Operation Homeland Honor, operationhomelandhonor.org.

Hello again Blog readers! I will be continuing to use Amis’s and Stevenson’s (2001) information regarding angel investing in their book, Winning angels: The seven fundamentals of early-stage investing. I will be sharing valuable information in this Blog from Amis and Stevenson (2001) about Harvesting.

Crawford (2017) notes that, “The purpose of the harvest strategy is to allow for equity investors to be repaid. Before making their investment, they will need to know the method of repayment and how long they will have to wait. The waiting period is normally three to five years. The actual length of time depends on the complexity of the company and the nature of its industry” (para 3).

Amis and Stevenson (2001) state, “Harvesting is the endgame of early-stage investments, the financial score by which you will measure your success. It is not as controllable as the decision to write the first check, but with advanced thinking and strategic action by both you and the entrepreneur, the likelihood of success can be increased dramatically” (p. 287).

What are the Types of Harvesting?

According to Amis and Stevenson (2001) there are seven different types of harvesting which include the walking harvest (taking cash out as it is earned), partial sale (the investor sells shares to management or to new investors), initial public offerings, financial sale (the company is purchased by a buyer with cash), strategic sale (the business is purchased by someone that knows the value of the company and is willing to pay for that value), bankruptcy, and Chapter 7. The last two types of harvesting of bankruptcy and Chapter 7 are negative and not what either the entrepreneur or the angel investor are ever hoping for. However, the better choice of the two negative harvesting methods is bankruptcy. (Amis & Stevenson, 2001).

Harvesting Should be Included in Your Business Plan:

Crawford (2017) notes, “When a business plan contains a harvest strategy, equity investors and lenders are assured that the owners intend to develop the business and eventually sell it, either to public investors or to another company. Management’s challenge will be to run the company correctly and turn it into an attractive investment candidate for others when the time comes for the exit event” (para 5).

The full article by Crawford can be found at the following link:

https://smallbusiness.chron.com/harvest-strategy-business-plan-52874.html

Points to Keep in Mind Regarding Harvesting from Amis and Stevenson (2001):

Think about harvesting from the beginning

At times, negative harvesting is your best option!

Let’s hope your end harvest is a happy and successful one!

References

Amis, D., & Stevenson, H. H. (2001). Winning angels: The seven fundamentals of early-stage investing. London: Financial Times Prentice Hall.

Crawford, C. (2017, November 21). What Is a Harvest Strategy in a Business Plan? Retrieved May 23, 2019, from https://smallbusiness.chron.com/harvest-strategy-business-plan-52874.html

Welcome Blog readers! I will be continuing to use Amis’s and Stevenson’s (2001) information regarding angel investing in their book, Winning angels: The seven fundamentals of early-stage investing. I have shared information in previous Blog posts regarding Sourcing, Evaluating, Valuing, Structuring, and Negotiating. In this Blog post I will be sharing valuable information from Amis and Stevenson (2001) about Supporting. So let’s get right to it!

Who will support your new business? Perhaps and Angel Investor?

O’Flynn (2018) says, “Believe it or not, there are angels out there. For real. Not just the cosmic beings we often read in books and holy manuscripts, but real people who are ready to lend a hand, or a few thousand dollars, if you’re talking about business” (para. 1).

Angel Investors are people that are willing to invest and support entrepreneurs they believe in (O’Flynn, 2018).

Five Roles on Angel Investors:

The five roles of angel investors include being a silent investor (finances only), being a controlling investor (by taking control), being a coach (provides supports), being a team member (working within the new business either full or part time), and being on the reserve force (willing to help when asked to do so) (Amis & Stevenson, 2001).

What Types of Supports can Angel Investors Provide?

Amis and Stevenson (2001) note several types of supports that angel investors may give to new businesses including but not limited to:

Advice regarding strategy

Advice regarding product

Assistance with networking

Coaching

Mentoring

Monitoring

Evaluating

Value Events…What are they and what do they do?

Angel investors can really contribute to small business growth by helping with value events. Amis and Stevenson (2001) say, “A value event is essentially anything that brings a heightened level of excitement” (p. 254).

Value Events:

Help businesses to succeed

Increase success

Types of Value Events according to Amis and Stevenson (2001):

Marketing

Financial

Organizational

Operational

Production

Strategic

Hall (2015) notes that there is much value to in person marketing events noting that much effort is placed in online marketing but one should not forget that in person events are still important contact points noting that “…face to face interactions…” strengthen interactions. In other words, entrepreneurs should not forget the value and purpose of “in person,” “face to face” interactions with customers and potential customers. In addition, Hall (2015) notes that the entrepreneur should be present at planned events so that trust and respect can be established with the attendees. Be prepared to devote your time and effort to any events planned so that both your angel investor and your attendees/customers/potential customers realize your commitment to your company and to them. The entrepreneur remains at the forefront of making sure that the new venture is a success.

The full article can be found at the following link:

https://www.forbes.com/sites/johnhall/2015/04/12/the-value-of-events-in-a-marketing-world/#3302f0993d4c

While angel investors may be very helpful in supporting your new venture by organizing Value Events to promote your product, YOU are still at the center of your success so plan to show up and make an impact!

References

Amis, D., & Stevenson, H. H. (2001). Winning angels: The seven fundamentals of early-stage investing. London: Financial Times Prentice Hall.

Hall, J. (2015, April 12). The Value of Events In A Marketing World. Retrieved May 23, 2019, from https://www.forbes.com/sites/johnhall/2015/04/12/the-value-of-events-in-a-marketing-world/#3302f0993d4c

O’Flynn, D. (2018, November 16). Angel investing: The new way of supporting small businesses and startups. Retrieved May 23, 2019, from https://born2invest.com/articles/angel-investing-new-way-supporting-businesses-startups/

Hello Blog readers! I will be continuing to use Amis’s and Stevenson’s (2001) information regarding angel investing in their book Winning angels: The seven fundamentals of early-stage investing. I will be sharing valuable information in this Blog from Amis and Stevenson (2001) about Negotiating.

Why is Negotiating important?

Let’s say you have pitched your new venture to an angel investor and they appear to be interested in your venture. You want to be sure that you close the deal and to close the deal it may take negotiating.

The article, Negotiating with Angel Investors (2019) states, “…negotiating with angel investors becomes a very important and prime feature in a business environment” (para. 1). There are several considerations that new entrepreneurs should be made aware of which include: entrepreneurs should use their pitch to an angel investor to target the immediate goal, your conduct is being evaluated by the angel investor, giving an angel investor 20% of your company is reasonable, entrepreneurs should be able to show company value, and an angel investor may want to be on your board of directors (Negotiating with Angel Investors, 2019).

The following is a link to the complete article which may help you understand negotiating with angel investors:

Negotiating With Angel Investors

Now that we know some points that entrepreneurs should be aware of let’s discuss the point of view from the angel investor. Amis and Stevenson (2001) note that some investors negotiate and some do not.

Negotiating approaches include direct negotiation, one-shot offers, and negotiation led by an outside party. For those angel investors that do not negotiate several factors come into play including: the price, terms, investment, and role (Amis & Stevenson, 2001).

Amis and Stevenson (2001) point out that “Determining a negotiation strategy requires consideration of your (the angel investor’s) preferred role, time availability, preferred relationship with the entrepreneur, whether you are the lead investor, and the amount of capital you intend to invest” (p. 225).

One thing to be sure of, if you have an angel investor interested in your brand new entrepreneurship venture, then take the time to appeal to what they are looking for…if you want to obtain their funding. From reading back through previous Blog posts, readers will remember that the entrepreneur must be at the top of their game plan in all aspects of their venture. Investors are looking for competent entrepreneurs who are on top of their game. The entrepreneur is being evaluated in every arena. Therefore, entrepreneurs must be prepared in all areas including when it comes down to negotiating. Be sure to take a look at the full article at the link posted in this Blog for ideas already mentioned in this Blog along with other ideas to prepare for negotiating. Preparation is a key to success. You want and need for your venture to be and remain successful over the long haul. Obtaining an angel investor or two could just be what you need to push your new venture into success and to keep it there.

References

Amis, D., & Stevenson, H. H. (2001). Winning angels: The seven fundamentals of early-stage investing. London: Financial Times Prentice Hall.

Negotiating With Angel Investors. (2019). Retrieved May 23, 2019, from https://www.angelinvestorreport.com/negotiating-with-angel-investors/

Welcome back Blog readers! Amis’s and Stevenson’s (2001) information, regarding angel investing, in their book Winning angels: The seven fundamentals of early-stage investing will be part of my Blog post again as we learn valuable insights together. I will be sharing information in this Blog from Amis and Stevenson (2001) about Structuring.

Koss (2007) states, “Structuring the deal is a key aspect of completing an angel round of financing. It is critical to ensuring that management, employees, past investors, current investors and future investors are all satisfied with the company under its new capital structure. As a result, negotiating and structuring the deal can be the most complex aspects of angel investing” (p. 1).

Lets explore some details about structuring…

What options exist?

Here are a few options:

Three common ways to structure angel investments include: common stock, preferred convertible with various terms, and convertible note with various terms.

According to Amis and Stevenson (2001) the common stock structure “…is the ‘complete faith’ option, which is used most often by family, friends, and fools as well as winning angels who rely more on the integrity of the entrepreneur as well as their own ability to source or evaluate” (p. 190). Some angel investors, especially those that have lost money on common stock structure deals, refuse to have any part of common stock structures and there again some angel investors will (Amis & Stevenson, 2001). Amis and Steven (2001) note that with the common stock structure, in the best case scenario, an angel investor can make a substantial amount of money without having to invest their time and involvement or in the worst case lose their entire investment. Amis and Stevenson (2001) note that a preferred convertible with various terms structure is most common. Amis and Stevenson (2001) states, “The preferred share structure offers considerably more protection to the investor and this is why…many angels come around to using it” (p. 192). Lastly, regarding the convertible note with various terms structure, Amis and Stevenson (2001) state, “The convertible note is becoming a more common vehicle as financings are occurring in shorter time frames” (p. 193). These are certainly some structuring options. Amis and Stevenson (2001) give some final thoughts on structuring which include: keeping things as simple as possible and making sure that you understand these three structure types.

Finally, to finish up this Blog post on structuring, it is important to note that Koss (2007) gives several examples of “warning bells” or “red flags” regarding structuring deals. Koss (2007) states, “There are some red flags that investors should watch out for. Are there any unknown investors? Is the term sheet too complicated or inappropriate for the nature, context and stage of the company? Is the company raising enough money? What’s the possibility of dilution (p.  9)?” I highly recommend reading through the entire list of “warning bells” and “red flags.”

To read the entire article by Koss (2007) please click the following link:

https://www.angelcapitalassociation.org/data/Documents/Resources/AngelCapitalEducation/ACEF_BEST_PRACTICES_Deal_Structuring.pdf

Thanks for reading and good luck on finding investors and structuring deals for your new venture!

References

Amis, D., & Stevenson, H. H. (2001). Winning angels: The seven fundamentals of early-stage investing. London: Financial Times Prentice Hall.

Koss, A. (2007, July). Best Practice Guidance for Angel Groups – Deal Structure and Negotiation. Retrieved May 22, 2019, from https://www.angelcapitalassociation.org/data/Documents/Resources/AngelCapitalEducation/ACEF_BEST_PRACTICES_Deal_Structuring.pdf